April marks the end of California’s first open-enrollment period, during which more than 3 million Californians signed up for new health insurance coverage.
As more Californians gain access to health insurance, however, it is important for consumers to understand how to use their newly acquired insurance.
A 2013 study by the Journal of Health Economics found that many consumers don’t fully understand the details of their health insurance plan. Of those consumers surveyed in the study, only 14 percent were able to explain the differences between basic insurance concepts such as deductibles and co-pays.
One way consumers can get a better handle on their health insurance policy is by understanding the different types of cost associated with their plan. There are typically four different types of cost included in a health insurance plan: Premiums, co-pays, co-insurance and deductibles. It’s important to factor in all of these different types of costs when picking a plan and using it.
Now, let’s review what some of these terms mean.
A health insurance premium is the amount of money a person pays periodically – usually monthly – to buy an insurance plan. In order to keep your health insurance, you must continue paying this amount for your entire benefit year.
A co-pay or co-insurance is separate from what you pay for your premium. These terms refer to the amount you have to pay out of your own pocket every time you go to the doctor or receive a service. A co-pay is a fixed amount that you pay for a service. For example, the $20 you pay every time you see your doctor would be a type of co-pay. Co-insurance refers to the percentage of the cost of a service that you are responsible for paying. Some plans charge either co-pays or co-insurance, while others may include a combination of the two.
A final type of cost that is important to understand is a deductible. A deductible is the amount a consumer must pay each year before their health insurance will start paying for a portion of their health care costs. For example, if you purchased a plan with a $500 deductible, this means that you will have to pay $500 out of your own pocket in addition to your monthly premium before your health insurance will start paying for you. Before you meet that deductible, you will be responsible for paying the full cost of any services you receive. Co-pays and co-insurance costs will come into effect after you have reached the deductible in the plan you have chosen.
Thankfully, most plans are now required to have an out-of-pocket maximum. This means that there is a limit on how much you are expected to pay out-of-pocket through deductibles, co-pays and co-insurance during the policy year before your insurance will cover 100 percent of your health care costs. Most health plans are also required to cover preventative services and screenings, such as mammograms and pap smears at no cost to you.
While many of these costs may seem overwhelming, especially if you’ve never had health insurance, it’s important to remember that having health insurance can not only protect your health but can also protect you financially in the event of an emergency or unforeseen medical circumstance. Ultimately, this will enable you to take the preventative measures necessary to protect your health today and ensure a healthy future for tomorrow.
Morgan Westfall is a Project Coordinator for the Community Clinic Consortium, which is a partner of the Solano Coalition for Better Health.